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BANK Negara Malaysia has underscored that rising medical costs are an increasingly serious burden for Malaysian households, setting the stage for a proposed baseline medical and health insurance/takaful plan designed to improve affordability while containing long-term cost pressures.
The proposal, outlined in a white paper jointly developed with the Ministry of Finance Malaysia and Ministry of Health Malaysia, forms a central pillar of the RESET strategy announced in March 2025.
It seeks to introduce a standardised base plan with lower premiums while shifting private healthcare payments from a fee-for-service model to a diagnostic-related group system to better manage escalating costs.
BNM deputy governor Aznan Abdul Aziz said the initiative reflects a broader government commitment to ensuring private healthcare remains both accessible and financially sustainable.
“We wanted to create a plan that is clear and easy to understand; one that provides essential medical protection and remains affordable over time.
“This plan stands on its own and isn’t bundled with any investment product, so you know exactly what you’re paying for and what you’re getting,” he said.
“We know that some people find current insurance plans complicated or are worried about rising premiums. The base MHIT plan aims to be straightforward and stable, especially for those who want something they can keep up with, year after year.
“It’s not meant to cover every possible scenario. Trying to do so would make premiums much higher. Instead, it’s about providing meaningful coverage for what matters most, while keeping costs sensible with better outcomes for patients,” he added.
The plan also aims to widen access to coverage, including for individuals with stable pre-existing conditions who currently face difficulties obtaining insurance. Aznan pointed to a “no look-back” provision designed to ensure policyholders retain protection when it is most needed.
“Today, such individuals face difficulties getting any form of insurance coverage even if risks to the broader pool could be contained,” he said.
Despite these intentions, healthcare advocates argue the proposal may only serve as a short-term fix to deeper structural issues, particularly chronic underfunding and staffing shortages in the public healthcare system relied upon by the majority of Malaysians.
Concerns have intensified following data showing that 5.2 per cent of policies, or around 340,000 medical and health insurance/takaful plans, were surrendered between January 2024 and June 2025, raising fears of increased pressure on public hospitals as more patients turn to government services.
Economist Geoffrey Williams warned that introducing a lower-cost, government-backed product could distort the broader healthcare financing ecosystem.
“By introducing a government-backed cheap product there is a risk that people will switch into that from their current insurance, which is likely to be more expensive,” he said.
“This will then mean that they may be under-insured and the demand for MHIT services will be too high based on the premiums. This would make MHIT under-funded and it would need a government bailout pushing money to private insurance and private commercial healthcare companies,” Williams told The Star.
He also cautioned against allowing withdrawals from the Employees Provident Fund to finance premiums, citing long-term risks to retirement adequacy.
“There is a crisis in under-funded retirement savings and drawing down RM50 per month or RM600 per year will draw down the retirement savings of low-income groups,” he said.
“All this option would do is to push billions of ringgit from people’s retirement savings into private insurance and private healthcare companies.”
Williams argued that a more efficient approach would see the government directly purchasing private healthcare services while regulating costs and quality, thereby removing intermediaries.
“A better outcome can be achieved by the government acting as the purchaser of private healthcare, cutting out the insurance middlemen and regulating service quality and fees in the private sector,” he said.
Another economist, Manokaran Mottain, echoed concerns over the use of retirement funds and questioned the affordability of premiums for older Malaysians.
“Retirement savings are low as it is, and there are already too many caveats that allow for EPF withdrawals,” he said.
He also noted that the proposed premium levels for senior citizens appear high relative to the policy’s stated aim of curbing rising costs, stressing the need for a more balanced approach if the scheme is to succeed.
Under the proposal, individuals aged 60 to 65 would pay between RM280 and RM350 in monthly premiums, with a RM1,000 deductible and an annual coverage limit of RM150,000. For those aged 75 and above, premiums are projected to range from RM500 to RM780.
As policymakers move towards a planned rollout next year, the debate highlights the difficult trade-offs between affordability, sustainability and equity in Malaysia’s evolving healthcare financing landscape. - March 23, 2026
